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Thursday, July 31, 2014

An excerpt from
from Seven Choices for Success and Significance
by Nido R. Qubein

What is success? Only you can define it in
your own life. In my own life, I have attempted to define both Success and
Significance.

To me, Success is secular. Significance is spiritual.

It doesn’t matter how you define your own spirituality. Spiritual matters are
always finer, deeper, and longer lasting than secular matters.

Success focuses on three Fs:

• Fans
• Fame
• Fortune

Success is focused on tasks, even goals.

Significance also focuses on three Fs:

• Faith
• Family
• Friends

But, significance focuses on purpose. Why am I
here? What do I do with the talents, experiences and skills that I have? How
can I make the world a better place? How do I plant seeds of greatness in the
lives of those around me? How do I make an impact in the circles of influence
where I find or place myself?

To choose success and significance, you must be a strategic thinker who:

• Has a clear vision of what you want to accomplish
• Develops a solid strategy that answers three questions:

- Who or what are we today?
- Who do we want to become?
- How do we get there?

When implementing your strategic plan for success, it really comes down to
three “Ds”:

Decide what you want most to achieveDetermine the first step to getting what you wantDo the first thing that will start you moving toward your goal.

Using these seven keys, you can choose success and significance. But keep
this in mind: success is not a matter of luck, not an accident of birth, not
a reward for virtue. The most successful people I know are the ones who have
something to do, somewhere to be and someone to love.

No one is responsible for your success or your joy. You must search for it
and be in a continual state of earning it.

To merely succeed is not an end in itself. You must use your success to
impact other people…to impact the world…to Live Life from the Inside Out.

It all starts with the choices you make—they determine the person you will
become.

INNOVATION SPECIAL What
The Wright Brothers Could Teach Today's Innovators About Solving Problems

THREE TIPS FOR TESTING YOUR ASSUMPTIONS THE WRIGHT--ER, RIGHT--WAY

One key to successful innovation, a growing body of
innovation thinkers believe, is trial-and-error experimentation. Proponents of
the Lean Startup methodology urge innovators to create a minimum viable product (MVP)--something that solves a customer’s
problem adequately but isn’t perfectly polished--and use it as a vehicle to
gather critical in-market learning. The approach makes many executives inside
big companies nervous. After all, experiments can fail, which implies taking on
a risk that could blow back in some way to harm the core business. And in some
industries even developing a good enough product is time consuming and expensive.

Consider how, for example, innovators approached the
development of manned flight. Since most animals that can fly have wings, one
group naturally thought about developing strap-on wings. To test a particular
design, they’d go to the top of a tall structure, and jump. Wrong assumptions
had predictable consequences. Other innovators tried to create flying machines,
taking years to build expensive prototypes that often didn’t survive the
testing process.

THE WRIGHT BROTHERS FOUND RELATIVELY SIMPLE, LOW-RISK
WAYS TO TEST THEIR ASSUMPTIONS.

The way the Wright Brothers approached the problem
offers important lessons for modern innovators. The Wright Brothers were
consummate experimenters. But they found relatively simple, low-risk ways to
test their assumptions. Rather than going to the top of a tall building and
jumping or spending years tinkering to create the perfect prototype, they built
and flew kites. Not only could
they build kites more rapidly, but they hadn’t risked life and limb or depleted
their bank accounts
when it turned out that they got something wrong.

Still, they hungered for other ways to speed the
learning process. In 1901, using a wooden box, a hacksaw blade, bicycle-spoke
wire, and a fan, they built a six-foot long “wind tunnel.” After a month of
tinkering, they figured out how to use it to test assumptions about design. The
tunnel allowed them to see how different shaped wings would perform in
different wind conditions without having to build an entire craft, and, of
course, rebuild that craft if something bad happened.

THEY DIDN’T RISK LIFE AND LIMB WHEN IT TURNED OUT THAT
THEY GOT SOMETHING WRONG.

By simplifying the testing process, the Wright
Brothers could test more than 200 types of wings in two exhilarating months.
They experimented with models proposed by other would-be aviators, carefully measuring
the aerodynamic lift of different designs in different conditions. Wilbur Wright later
recalled that they learned that most of the mathematical assumptions inventors
used about how different aspect ratios--the ratio between the wing’s length and
its span--would affect lift were “full of errors.”

Analyzing the data that came from their rapid
experiments accelerated the Wright Brothers’ path to developing a viable flying
machine. Wilbur wrote, “it is doubtful if anyone would have ever developed a
flyable wing without first developing this data.”

The wind tunnel allowed the Wright Brothers to learn a
tremendous amount without creating full prototypes or doing the equivalent of
in-market learning. And you can learn before you build a MVP by considering
three straightforward approaches.

Do desk research. A few
years ago, Innosight advised a
team inside a big consumer products company that was thinking about a new
offering to target college campuses. The company hoped to deliver a device to
centralized points on campuses, drive usage through targeted awareness
campaigns, and then make money on the consumable components that went into the
device. The business plan assumed that it would take about three months to work
through the process of getting approval to sell to a school. However, no one on
the team had ever sold to a school before.

They could of course go and pilot the idea at a few
schools and see how long it took. Or they could simply pick up the phone and
call someone who made a living selling to schools. One of the team members had
a family friend who worked at a company that sold security solutions to
schools. He was more than happy to talk about his experiences. It turned out in
many cases the sales cycle wasn’t three months--it was three years. Schools
move slowly, with decision-making authority intentionally diffuse. That didn’t
mean the idea was bad, it just meant the team needed to approach it differently
and assume it would grow more slowly than it first projected. There is a
misbegotten belief that action is the only way to learn. The combination of
LinkedIn and Google mean that experts who can shed light on critical
assumptions are no more than a mouse click away.

THE WIND TUNNEL ALLOWED THE WRIGHT BROTHERS TO LEARN A
TREMENDOUS AMOUNT WITHOUT CREATING FULL PROTOTYPES.

Run a thought experiment. Fast food giantMcDonald’s
regularly evaluates new concepts for its menu. A few years ago it considered a
shrimp salad. The idea fit general trends toward health consciousness. It could
be pre-packed, fitting neatly into McDonald’s delivery model. However, any idea
McDonald’s introduces has to have the potential to scale to its tens of thousands of
stores around the globe. McDonald’s ran a thought experiment. How much shrimp
would be required if it scaled the idea around the world? How did that compare
to the current supply of shrimp? It turned out that
McDonald’s would put a significant dent in the U.S. shrimp supply, which would
drive up prices and make the idea unprofitable. You can run your own “shrimp
stress test” in your imagination. What would it look like if you succeeded? Is
there a hidden rate-limiting assumption that would make success impossible?
Thought experiments are wonderful ways to learn because they don’t cost
anything, and force you to take an external perspective on key strategic
issues. They can be conducted by an individual, but work best when they involve
people who bring diverse, external perspectives.

THOUGHT EXPERIMENTS ARE WONDERFUL WAYS TO LEARN
BECAUSE THEY DON’T COST ANYTHING.

Perform a focused feasibility test. About
15 years ago, Reed Hastings had an idea. What if, instead of going to a store
to return a movie, a consumer could simply return it through the mail?
Customers would still pay late fees--after all, that enticement to return
videos helped ensure adequate inventory of movies--but the ease of dropping a
DVD in the mail would increase convenience and customer satisfaction.
Ultimately Hastings and his team built an incredibly sophisticated system to
manage the intricacies of delivering millions of DVDs around the United States
and shifted the model to a highly disruptive all-you-can-eat subscription
offering. Before making any investment, however, Hastings had a basic question:
could you actually mail a DVD and not have it get mangled? It was simple enough
to learn more about this uncertainty. Hastings mailed a CD to himself in an
envelope. A couple of days later he had his answer: the postal service could in
fact complete a mailing without damage. Total investment: less than $5.

The activities described above aren’t quite as
exciting as developing a full blown offering and attracting real customers.
But, like the wind tunnel, they allow innovators to learn quickly with lower
investment and lower risk. As Wilbur Wright noted, “Sometimes the non-glamorous
lab work is absolutely crucial to the success of a project.”

HTC now has
a number of dual SIM smartphones to compete with Indian brands. The Desire 616
is the latest midrange offering from HTC with an octa core processor.While most budget smartphones from Indian brands
have a 1.7Ghz Mediatek octa core, Desire 616 has a 1.4Ghz octa core. Not that
this affects day-to-day performance — most apps and games run without a hitch
and even multi-tasking is smooth as long as you don't have too many apps.

However, the 1GB RAM feels less — evident while
playing games like ShadowGun and Asphalt 8. In addition, HTC has cut corners in
storage. You get 4GB of internal storage out of which only 1.62GB is available
for apps.

Thankfully there is a microSD slot present for
expansion, but at this price just 4GB storage from a global brand like HTC is
disappointing. It feels sturdy to hold and borrows design elements from the
Desire 816. However, the plastic rear panel attracts a lot of scratches and
fingerprints that make it look old within a few minutes of usage.

The 5-inch HD display has good touch response
and bright colours. We noticed that the signal reception on the review unit we
had was weak — where other phones showed 3 bars, it showed just 1 bar or at
times none.Multimedia performance was a mixed bag.

The rear camera took average images in daylight,
but in low light and even indoors it proved to be useless — images were too
noisy, there was lack of details and flat colours. The saving grace was video
recording in full HD resolution which was good quality.

Audio output from the speakers was good — not
very loud. but good enough for the intended usage. The 2,000mAh battery lasted
one day as expected.Unfortunately, the Desire 616 does not offer
anything that makes it stand out. Check the Panasonic P81 for the same price
that offers a larger display, similar hardware with better performance and dual
SIM capabilities.

Otherwise, also consider the new Xiaomi Mi 3,
which is far better in every way and it costs just Rs 13,999.

Executives at all levels see an important business
role for sustainability. But when it comes to mastering the reputation,
execution, and accountability of their sustainability programs, many companies
have far to go.

Company leaders
are rallying behind sustainability, and executives overall believe the issue is
increasingly important to their companies’ strategy. But as it continues to
grow into a core business issue, challenges to capturing its full value lie
ahead. These are among the key findings from our most recent McKinsey survey on
the topic,1 which
asked respondents about the actions their companies are taking to address
environmental, social, or governance issues, the practices they use to manage
sustainability, and the value at stake.

One such challenge is reputation management.
Year over year, large shares of executives cite reputation as a top reason
their companies address sustainability; of the 13 core activities we asked
about, they say reputation has the most value potential for their industries.
However, many of this year’s respondents say their companies are not pursuing
the reputation-building activities that would maximize that financial value.

Comparing companies with the most effective
sustainability programs (our sustainability “leaders”) with others in their
industries highlights another obstacle: incorporating sustainability into key
organizational processes, such as performance management, one area where the
leaders report better results than others. Beyond strong performance on
processes, the leaders share other characteristics that are keys to a
successful sustainability program—among them, aggressive goals (both internal
and external), a focused strategy, and broad leadership buy-in.

Sustainability rising

According to executives, sustainability is
becoming a more strategic and integral part of their businesses. In past
surveys, when asked about their companies’ reasons for pursuing sustainability,
respondents most often cited cost cutting or reputation management. Now 43 percent
(and the largest share) say their companies seek to align sustainability with
their overall business goals, mission, or values2 —up from 30 percent who said so in 2012.

One reason for the shift may be that company
leaders themselves believe the issue is more important. CEOs are twice as
likely as they were in 2012 to say sustainability is their top priority. Larger
shares of all other executives also count sustainability as a top three item on
their CEOs’ agendas.

As sustainability rises in significance,
capturing its full value grows more challenging—perhaps because the more that
companies prioritize sustainability, the more it needs to be integrated into
(and even change) the core business. At companies that are already taking
action, respondents most often cite challenges related to execution: the
absence of performance incentives and the presence of short-term earnings
pressure that’s at odds with the longer-term nature of these issues.
Accountability is an increasing concern: 34 percent of executives (compared
with 23 percent in 2011) say too few people at their companies are accountable
for sustainability. At companies that aren’t pursuing sustainability
activities, respondents continue to cite a lack of leadership prioritization as
the top challenge to taking action.

Reckoning with reputation

Of 13 core sustainability activities we asked
about, executives most often say their companies are reducing energy use in
operations (64 percent), reducing waste (63 percent), and managing their
corporate reputations for sustainability (59 percent). These actions were cited
most often in 2011 and 2012, and a growing share of executives now identifies
reputation management as a core activity. They are also most likely to say that
among these activities, reputation management has the highest value-creation
potential for their industries over the next five years.

Yet there’s a lack of clarity around reputation
management, compared with other, better-defined activities, such as reaching
new markets with sustainable products. We asked executives what actions the
companies they work for take to manage their reputations, and, on average,
companies most frequently communicate their activities to consumers and
maintain stakeholder relationships. Yet the results vary by industry,
indicating that companies understand and value reputation in very different
ways .

Many of the
differences depend on how much action companies are taking on
reputation, and on the overall sustainability agenda. In extractive services,
executives say their companies are pursuing seven core sustainability
activities, with three-quarters saying reputation management is one of them
(compared with 59 percent of all respondents). The reputation-building actions
these companies focus on—local community investments, external reporting, and
employee volunteering—differ, then, from those of their peers in high tech,
where companies take an average of five actions and just half of respondents
say reputation management is one of them. These results confirm that there’s no
one-size-fits-all approach to reputation, possibly one reason why reputation,
like sustainability more broadly, is hard for many companies to manage.

When asked which activities maximize financial
value, respondents most often cite customer communications. Beyond that, there
are disparities between current reputation-management activities and the ones
that are most critical to value creation (Exhibit 4). These results also vary
by industry and reflect the importance of understanding and communicating
sustainability’s financial value, from the leadership down. In extractive
services, where the board and C-suite are most engaged and respondents are the
most likely to expect that sustainability will create value, respondents
identify the same activity (community investment) as a current action and a
source of value. In contrast, those in financial services—where respondents
report the lowest level of leader engagement and perceived value—most often
cite employee volunteering, the activity they rank lowest with respect to value
creation.

What leadership looks like

Regardless of a company’s industry, its
value-creation efforts require certain organizational traits. From our
experience and previous work,3 we
identified a few as the building blocks of a successful sustainability program.
Indeed, when we identified our sustainability leaders—companies where
executives report the strongest performance on core sustainability activities, relative
to industry peers—we found that they share these characteristics.

It’s not surprising that leaders are much
likelier than other companies to possess all 12 of these characteristics,
though the results suggest which traits differentiate leaders from the rest
(Exhibit 5). Executives at these companies are almost five times more likely
than others to say they use aggressive external goals for sustainability, more
than three times likelier to report a focused strategy, and nearly three times
likelier to report an organization-wide understanding of sustainability’s
financial benefits. In addition, leaders more often have in place the key
components of performance management, such as aggressive internal goals and
broad leadership coalitions to develop their programs.4

What’s more, much larger shares of executives at
the leader organizations say their top leaders prioritize sustainability and
report higher employee engagement on sustainability at every level, including
CEOs, board members, and sustainability advisory committees. They report that
their companies are taking more action to manage the life cycles of their
products, and are four times more likely than others to say they have already
implemented a life-cycle strategy. And they say their companies face fewer
barriers to realizing value from sustainability, because they report better
overall performance on the practices that underpin a healthy sustainability
organization.

Organizing for sustainability

To better understand the defining traits of
well-performing sustainability programs, we examined the organizational
practices that underlie these characteristics. Of these, executives say their
companies are better at fostering an organizational culture around
sustainability and setting the direction for their programs. They struggle most
with components of program execution, including employee motivation, capability
building, and coordination of their sustainability work, which is reflected in
the responses on specific practices (Exhibit 6). These results make sense,
given the current levels of alignment between sustainability and various elements
of the organization. Fifty-eight percent of executives say sustainability is
fully or mostly integrated into their companies’ culture, compared with 38
percent who say so for performance management.

Looking more
closely at individual practices, some interesting patterns emerge. We
identified four distinct approaches to the sustainability organization: leader
supported, execution focused, externally oriented, and deeply integrated (see
sidebar, “Four approaches to the sustainability organization”). The first
approach is characterized by actively engaged leaders across the company,
employee encouragement, and clear strategy; the second by clear structure,
accountability, and middle-manager engagement; the third by the use of external
ideas, networks, and relationships, as well as top-leader and middle-manager
engagement; and the fourth by employee incentives for sustainability work, a
focus on talent, and even engagement on sustainability at all levels of tenure.
Our sustainability leaders are represented in each of these four approaches,
confirming that there’s no single formula for sustainability success.

Looking ahead

·Extend
the product life cycle. Today,
resource constraints are creating unprecedented prices and volatility in
natural-resource markets. Yet the results indicate that most companies have not
even begun to implement strategies that extend the life of their products and
thereby reduce their resource dependence in a significant way. According to our
other research,5there is huge value potential in better design and in
the optimization of products for multiple cycles of disassembly and reuse.
Forward-looking companies should begin investing in the “circularity” of their
products, for the benefit of society and for their bottom line. On materials
alone, companies could potentially save more than $1 trillion per year.

·Look
to technology. Similarly,
technological advances are creating opportunities to drive sustainability
solutions.6 Yet only 36 percent of respondents say their
companies are mostly or fully integrating sustainability into their data and
analytics work. Companies that want to capture increasing value in a
resource-constrained world should spend more time thinking about how to
integrate their technological capabilities into their overall sustainability
agenda.

·Focus
your strategy. As
sustainability becomes more central to the business, companies should align
internally on what they stand for and what actions they want to take on these
issues, whether it’s economic development or changing business practices.
Whatever approach companies take, they should develop a strategy with no more
than five clear, well-defined priorities—one of the key factors for successful
sustainability programs.

FOR THE FULL ARTICLE AND EXHIBITS SEE

http://www.mckinsey.com/Insights/Sustainability/Sustainabilitys_strategic_worth_McKinsey_Global_Survey_results?cid=other-eml-alt-mip-mck-oth-1407About
the authors

Wednesday, July 30, 2014

Many IIT grads quitting high-profile jobs to start
their own cos in the $48-billion food sector

MUMBAI:
Prasoon Gupta, Manish Goyal, Badal Goel — all graduates from the Indian
Institutes of Technology, all with high-paying corporate jobs. Then they gave
it all up to get into the food business, setting up individual ventures that
form part of the burgeoning $48 billion food service business in India. In
February, IIT Roorkee graduate Gupta quit his five-year-old venture

Tech Buddy Consulting and founded a new eating
concept in Delhi that caters to more than 300 people daily. Sattviko is
inspired by the sattvik way of life that emphasises purity and serves cuisine
from India and across the world, such as Mexican, Italian and American that
conforms to its rules, such as no onions or garlic. Gupta has roped in a chef
formerly with the Taj Group who's constantly dreaming up new dishes for the
menu."While the initial investment in setting
the company, its assets and hiring people is high, we are looking at becoming a
Rs 100-crore chain within the next two years of operations," said Gupta.

The two Sattviko outlets in Delhi generate daily
overall business of Rs 35,000, he said. The company is in talks with venture
capitalists to raise Rs 15-20 crore which will be utilised for domestic and
overseas expansion in Dubai, the US and the UK in the next six months.FRSH, based in the capital and started by an alumnus
of IIT Delhi, serves corporate clients in Gurgaon looking for healthy food —
fresh salads, sandwiches and health juices.

"Right now, FRSH serves corporate offices
in Gurgaon and later we will start the service even for metro stations, schools
and apartment complexes as we are targeting high density areas," said
founder Badal Goel.The company has so far invested almost Rs 50
lakh in setting up a centralised kitchen, besides technology and manpower.
Several tech grads from the IITs and other reputed schools have, in the last
few months, been attracted to the food business and started their own outlets
and sites.

"It has demonstrated the potential to
become a sunrise sector and has seen interest from private equity firms as
well," said Ankur Bisen, vice-president, retail, Technopak Advisors.
According to Technopak, the food service market is projected to grow to $92
billion by 2020 at a compounded annual growth rate of 10%. These IIT graduates
are bringing technical expertise and systems from previous corporate jobs to
the food business. All these entrepreneurs have set up centralised kitchens to
maintain quality and eliminate wastage.

Last November, IIT Bombay graduate Manish Goyal
quit a management consulting job and founded Foodies Compass, an online
platform that solves the 'what to eat?' dilemma.

"As a backpacker and traveller, there was
always this problem of what to order due to lack of visual and credible
sources. So, we introduced this website and app where people can see visuals of
food before they order," said Goyal. Foodies Compass, which provides
pictorial menus of more than 150 restaurants in Gurgaon, plans to expand to
Mumbai, Delhi, Bangalore, Kolkata, Chennai, Hyderabad and Ahmedabad in the next
one year.There are scores of others who have made food
their business. Pushpinder Singh, who has a masters in computer science from
BITS Pilani and a BTech from IIT, has launched Travelkhana, which delivers food
to railway passengers and has funding from Google India head Rajan Anandan.
Chaayos, an NCRbased chai cafe which serves more than 25 varieties of tea,
competes with established coffee outlets.

"There is a high demand for chai and
because our products are priced lower, we see higher footfall and revenue than
other major coffee chains like CCD (Cafe Coffee Day), Barista, etc," said
Nitin Saluja, founder of Chaayos. An IIT Bombay graduate, Saluja opened Chaayos
in 2012 after discovering a passion for tea. Several private equity firms and
venture capitalists have pumped money into the food business, although their
experience in the sector has been mixed.The Indian Angel Network, a large group of angel
investors, has invested in Poncho, a Mumbai-headquartered quick service
restaurant (QSR) chain that serves Mexican food. Sequoia Capital has invested
in the Punebased fast-food company Faaso's, which serves wraps. Helion Ventures
and Footprint Ventures have invested in Mast Kalandar, a chain that serves
north Indian vegetarian food. According to Bisen of Technopak, given that
Indians are traveling widely and exposure to global cuisines is increasing, the
food business is set to expand.

Five indicators reveal when your sector is about to be
transformed by dematurity.

When contemplating possible threats to their business,
many executives worry about disruption. They see competitors with new
technologies poised to capture their existing customers, and they know it’s
better to be a disruptor than a disruptee. But disruption is often
misunderstood. In fact, as New Yorkerwriter Jill Lepore points out (“The
Disruption Machine,” June 23, 2014),
many celebrated cases have been less disruptive than they were portrayed as
being. What most industries experience as disruption is typically not a sudden
change from one source, but the accumulated impact of a range of interacting
factors. If you want to be prepared for disruption, it’s critical to understand
the more gradual, prevalent, and multifaceted dynamic that underlies it: a
phenomenon called dematurity.

Dematurity is what happens to an established industry
when multiple companies adopt a host of small innovations in a relatively short
time. Those seemingly trivial moves combine to rejuvenate the old mature
industry and make it young again. The term was
coined in the early 1990s by Harvard Business School professors William
Abernathy and Kim Clark. They were thinking of the U.S. auto industry, which
was undergoing a profound operational renewal, spurred by Japanese competition,
the quality movement, and lean management. Toyota and Honda, with their
superior production methods, did not fully disrupt Detroit. They dematured it.
Instead of collapsing, the Detroit Three adopted their rivals’ tools and
techniques, and the entire industry advanced to higher levels of quality and
customer satisfaction.

You can think of dematurity as a crescendo of
mini-disruptions that add up to great effect. It will hit most industries
sooner or later; it struck sectors as varied as software development,
entertainment, and defense contracting. It is happening right now in the U.S.
in healthcare and electric power generation. In the long run, dematurity is a
great boon, but it can also be terribly threatening to individual companies.
Nearly all cases of dematurity have one thing in common: the genuine surprise
of executives when it happens to their industry. It is all too easy to be
caught off guard—to ignore the small changes that appear one by one, to fail to
believe they will affect you, and to end up at the tail of the wave, outpaced
by competitors who saw the possibilities earlier.

Nearly all cases of dematurity have one thing in
common: the genuine surprise of executives when it happens to them.

The solution lies in gaining better sensitivity—in
other words, improving your ability to recognize and respond to the signals of
incremental change. This is difficult, but not because information about the
pending changes is sparse. Rather, the signals are too abundant. News breaks of
deals, partnerships, and market entrances or exits. Scholars, commentators, and
business leaders talk of looming disruption. Some of that talk is accurate in
its foresight, and some of it is hyperbole. It is difficult to know which is
which.

Here, then, to help you sharpen your mental gauge for
disruption and dematurity, are five often overlooked but genuinely prescient
signals of pending industry change. They reflect more than 20 years of close
observation of innovation launches in a variety of industries. These phenomena
tend to arise when an industry is on the verge of dematurity. Look for early
signs of these five changes, and you can better recognize the impact of today’s
events—and the trajectory of tomorrow’s.

New
Customer Habits

In the 1980s, most people who bought telephones
installed them in a single location, connected them to the telephone network
with a wire, and used them exclusively to communicate via voice. By the end of
the 1990s, mobile phones were available with analog transmission networks.
Consumers used them as portable supplements to their wired voice lines—a
widespread incremental improvement, but not a dramatic shift in people’s
habits.

Then digital transmission (2G and 3G) became
available. In 2002, people sent more than 250 billion text messages. Before
long, they began to integrate other functions—reading magazines and books,
listening to music, playing games, finding places to eat in unfamiliar
neighborhoods, and so on. This new group of consumer habits added up to a
paradigm shift in everyday life. The same person who might once have carried a
cellular phone, map, book, camera, Gameboy, and Walkman now could have one
device serving all those purposes. By 2007, the year the iPhone was introduced,
it was clear that major changes were coming in business and pricing models for
a broad group of digital industries—electronics, creative content, gaming,
photography, video, music—that had formerly operated independently of one
another.

A similarly powerful paradigm shift is happening now
in business-to-business IT with cloud- and Internet-based software
subscriptions, known as software-as-a-service (SaaS). This sector did not exist
before 2000. Formerly, nearly all corporate technology adopters bought the
software they needed to run their businesses, and installed it on machines
residing in their own facilities. Web-based software delivery models, known as
application service providers (ASPs), struggled to gain enough scale to make
money. They were hobbled by slow Internet speeds, non-modular software
development practices, and a lack of cloud computing, and their offerings were
too frustrating to be usable. Today, employees in companies of all sizes
routinely access application services via high-speed cloud connections, a
completely new customer habit that took hold only after incremental
improvements in related technologies and practices propelled SaaS across a
threshold of usability. The business is growing 20 to 30 percent per year;
this, plus its clear link to new habits, indicates that it has only just begun
to rejuvenate the software industry.

Not every promising technology fosters a customer
habit. The Segway, a highly publicized, technologically ingenious
self-balancing electric vehicle, turned out to be too unwieldy and expensive to
reform habits. It has sold only about 50,000 units since its launch in 2001.
Similarly, although the SodaStream home soft drink machines are widely distributed
kitchen appliances, it’s not yet clear whether they have enough popularity to
disrupt the carbonated beverage industry. Much depends on how many people
prefer the convenience of never running out and the thrill of making soda
themselves to the convenience of a prepackaged can that doesn’t need cleaning.

For every prospective innovation, whether you’re
promoting it or facing off against it, seek out any early signals of new
customer habits. The way people embrace or reject the innovation, and the logic
underlying their response, will tell you a great deal about whether it’s a
smartphone or a Segway.

New
Production Technologies

When a new technology changes the way an established
business produces its core product, dematurity often follows. For example, many
auto insurance providers are changing the way they price their policies.
Instead of classifying customers’ likely driving risk through actuarial
statistics about gender, age, and location of residence—and thus getting only a
rough statistical view of the habits and risk levels of individual drivers—they
now use data collected from in-car diagnostic devices. This allows them to
design more profitable products that return more savings to customers.
MetroMile, a startup launched in 2012, provides a free device for cars that
tracks mileage, driving patterns, and locations; it pays for this service with
insurance policies targeted at urban residents who drive less than 10,000 miles
a year and who pay by the mile. Progressive Insurance, a more established auto
and home insurance company, uses its own in-car monitor called Snapshot to
gather data, and rewards safer drivers with lower premiums.

The power generation sector—an industry that is
controlled by large, semipublic semi-monopolies—is also facing dematurity
because of new production technologies. Today, utility
customers buy electricity directly from the companies that generate it. But the
centralized, expensive infrastructure that has long been a strength of the
industry is also a source of costs, inflexibility, and disaster risk.
In particular, the hurricanes and other weather catastrophes of the past few
years, especially the tsunami that hit the Fukushima Daiichi nuclear power
plant in Japan in March 2011, have provided a wake-up call for many companies.
Losses related to those events, coupled with the falling costs of fuel cells,
solar panels, personal wind turbines, and other storage and power-management
technologies, will probably lead many power companies to embrace alternative
power systems and the digital grid over the next few years.

How do we know this long-awaited shift will finally
happen now? Because the technology is crossing a threshold of effectiveness and
cost efficiency. It also helps to recognize the complement of new customer habits:
When large companies such as Google use renewable technologies to power
installations like large server farms, it gives other commercial building
owners and nearby homeowners more reason to change their habits as well. When
the change reaches critical mass, the winning electric power companies will be
those that move away from selling supply, and toward selling wind turbines, gas
generators, and other means of production.

Another good example of production technology
breakthroughs is digital fabrication. This newly prevalent technology
is altering the foundational practices of most manufacturing industries.
Fabrication machines use software to control 3D printers that can build
components and products by placing hundreds or even thousands of layers of material—usually
plastic polymers or metals—in specified shapes. As with many
other technological advances, each year brings devices that are faster,
cheaper, and more varied in their capabilities than those of the year before.

The technology has now reached a tipping point. More
than two-thirds of U.S. industrial manufacturers surveyed in the 2013 PwC
Global Innovation Survey reported deploying 3D printers in some way. Many of
the machines are used to prototype new products. Early adopters report that their
product development cycles are shrinking as they quickly design, build, and
redesign products before launch. The technology also makes new supply chain
value propositions possible. Companies can produce discontinued parts as needed
on a 3D printer. Some manufacturing experts anticipate that the use of 3D
printing will cause a US$3.4 billion annual drop in materials transportation
costs, by enabling manufacturers to construct components entirely on site
instead of assembling them from smaller parts made by multiple suppliers.

New
Lateral Competition

There was a time when a family doctor had a near
monopoly on primary care services. The doctor knew the patient, knew the family
history, and was present whether in treating the flu or deciding a twisted
ankle needed an X-ray. The only problem was the time it took to get an
appointment, or the three-hour wait for the doctor to be free.

Today, the demand for accessible, quality
healthcare delivered in a timely way has created an explosion in convenience
providers. CVS’s Minute Clinic, Walgreens’s Healthcare Clinics, and urgent care
chains branded to major health networks are offering relatively inexpensive,
rapid, and accessible medical care. These cover
basic preventive services such as immunizations, flu shots, and diabetes tests;
treatment of sudden conditions such as burns, sprains, splinters, back pain,
and migraines; and chronic needs, such as the management of asthma and high
blood pressure.

A traditional family doctor might look down on these
clinics as providing an impersonal, transactional service, but consumers don’t
seem to mind. Visits to retail clinics in the U.S. tripled between 2008 and
2013. One recent study by the PwC Health Research Institute found that 45
percent of consumers across all age groups are willing to use alternative
providers for a range of basic health services. Their options to do so will
rapidly expand. CVS and Walgreens together have close to 1,000 clinic locations
in the United States, and Walmart is getting into the game through an
experimental partnership with Kaiser Permanente. These new healthcare actors
are giving primary care providers and even hospital emergency rooms competition
as the source of choice for quick, simple medical services.

The emergence of healthcare convenience chains is just
one example of the dematurity that occurs when a new type of competitor
appears—one with products and services that substitute for those of incumbents.
Usually these involve lateral moves, the transfer of capabilities and business
models from one sector to another, where the first sector has a completely
different (and better) way of solving the second sector’s problems. Though
they’re considered to be disruptive, lateral moves are not always that abrupt
and clear-cut; they often occur in incremental fashion, with some incumbents
(in the healthcare clinic model, Kaiser Permanente, for example) taking part.
Thus, when you see a lateral competitor emerge, even in nascent fashion, it’s a
good predictor of more widespread system change. Indicators visible today
include the use of mobile phones for paying bills, and the increasing
popularity of prefabricated buildings, which may revitalize some aspects of the
construction industry, even in urban settings like New York.

New
Regulations

Changes in government regulation patterns have an
enormous impact on the type and intensity of competition in many markets. The
passage of the Affordable Care Act, for instance, is adding millions of
patients to the healthcare system in the United States. This places new
competitive pressure on payors and providers, challenging both types of
companies to raise the effectiveness and cost-effectiveness of their offerings.
Suddenly, old players and new entrants alike see opportunities to keep patients
out of the doctor’s office with fitness and nutrition tools like MapMyRun and
MyFitnessPal, and diagnostic tools such as at-home strep throat testing kits.
This kit has the potential to prevent 78,000 doctor’s office visits per year,
valued at $94 million in physician revenue. Some of these diagnostic tools have
prompted new regulations. For example, the U.S. Food and Drug Administration
halted operations for the direct-to-consumer genetic testing company 23andMe,
pending review of its saliva sample DNA test service.

Financial services, energy, education,
transportation—all these industries and others are subject to new and revised
government rules, each with its own form of regulatory push and pull. New
payment systems such as bitcoin for online markets, or prepaid cards for
physical use, are undergoing scrutiny by multiple agencies around the world.
The carbon tax seems to be gaining momentum as one tool in the effort to curb
industrially produced greenhouse gas emissions. And recent U.S. government
relief for people with outstanding student loan debt may be just the beginning
of efforts to use regulatory means to make a college education more affordable
and to make evaluations of colleges more useful and accessible.

In general, emerging regulations give you a good way
to anticipate change, even in areas where imminent change seems unlikely. For
example, loosening regulation on the use of autonomous flying vehicles like
drones will have an effect on investigative journalism, law enforcement, and
insurance, along with the effects of their use in war and defense. Similarly,
when regulatory relaxation appears imminent for self-driving automobiles, we
can expect a major dematurity wave to hit mass transit systems, taxi services,
the car rental industry, and presumably many other transportation-related
endeavors.

New
Means of Distribution

The advent of digital infrastructure has already
thoroughly dematured media and entertainment—affecting formerly established
business models for music, motion pictures, publishing, periodicals,
advertising, and communications. Now it is
dematuring the physical world as well. For example, consider what the online
taxi dispatch service Uber is doing for personal transportation. Anyone who has
been caught trying to hail a cab on a rainy evening in New York City knows that
the system is in desperate need of an overhaul. As of 2014, there were fewer
than 15,000 yellow cab licenses (called medallions) in operation in the city,
and great peak pressure on demand: Everyone wants to use the supply of taxis at
the same time. This is a classic distribution system overload problem.

Uber sets up a new distribution system that overcomes
the limits of the old one. It allows riders to log in to the system and
indicate where they are and where they are going. The Uber app then responds
with a wait estimate and often a fixed price. Uber has moved the distribution
off the street corner and into the mobile device, which tells riders how much
their ride will cost based on real-time demand, weather, distance, and current
traffic conditions—take it or leave it. Instead of wondering how long it will
take to hail a cab, taxi riders feel the sense of certainty that a better
distribution system often brings. Whatever happens to Uber the company, we can
be certain that taxi management systems like the one it has developed are here
to stay.

Business-to-business environments are similarly
affected by emergent distribution shifts, like the one signaled by Monsanto’s
2013 acquisition of the Climate Corporation. Climate is an agricultural service
provider that sells crop insurance and delivers it in conjunction with in-depth
analysis derived by crunching data pertaining to such variables as weather and
soil composition. Agricultural clients get real-time advice about when to plant,
weed, or fertilize. Seemingly small adjustments can have a huge impact on farm
yields. If Monsanto chooses to bundle its seeds with insurance or data services
as a result of this deal, it will change the distribution system for
agricultural insurance.

Leading
in Dematurity

One of the few certainties in business today is that
dematurity is coming to your industry, and soon. Responding effectively
requires that you throw out old assumptions about how value is built and
sustained in your markets. You need to ask questions about your industry that
others believe have already been fully, inexorably, answered: What makes for
efficient scale? Who is the competition? Who are the customers? What do
customers want? Who owns what? Where is the risk?

If asking these questions and pursuing untraditional
answers seems like an unlikely path to success, consider this fact: More than
80 percent of the self-made billionaires who are profiled in my upcoming
book, The Billionaire Effect, made their billions in mature
industries that they reinvigorated by tackling one or many of the factors
identified above. They either introduced a product attuned to new consumer
habits, changed the technologies of production, adopted ideas from another industry,
adapted to new regulation, changed the distribution system, or made some
combination of those moves. Elon Musk, CEO of Tesla Motors and SpaceX,
challenged the internal combustion engine’s dominance in the auto industry by
developing a customer-friendly electric car. Farallon Capital Management
founder Tom Steyer worked laterally: He created an investment vehicle for
university endowments and changed how those customers defined profitable
investing. Alibaba founder Jack Ma created one of the largest e-commerce sites
in the world by taking advantage of production and distribution changes
inherent in the Web to provide platform and infrastructure services to
thousands of small businesses.

Although dematurity is inevitable, your business can
be the one that benefits most. Half the task is recognizing the facets of
impending change early enough to prepare. The five indicators in this article
provide you with a starting point, a way to begin honing your judgment and
identifying the real threats to your industry. The other half of the task is to
respond in a way that makes you stronger: by assembling and integrating the
capabilities you’ll need in this new, rejuvenated marketplace. The right
capabilities will probably be a combination of what you already do well and
what you must learn to do from scratch. If you can set your company up to sense
and respond to dematurity ahead of time, then you’ll be one of the first to
catch the big wave of small changes—before everyone else in your industry gets
on board.

By John Sviokla is
a principal and U.S. advisory innovation leader with PwC. He also leads
the Exchange, a think tank for business leaders. He is the coauthor
of The Billionaire Effect: What Extreme Producers Can Teach Us
about Breakthrough Value (with Mitch Cohen; Portfolio, forthcoming).